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Global Gold Demand Steady Despite Indian Repression; PBOC "Elephant In Room" Ignored ... For Now

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Gold settled modestly higher for a second straight session on today, sticking to a very tight trading range.

Today’s AM fix was USD 1,291.50, EUR 943.46 and GBP 767.56 per ounce.

Yesterday’s AM fix was USD 1,301.00, EUR 948.67 and GBP 773.85 per ounce.



Gold in USD - Daily, 5 Year (Thomson Reuters)

Investors weighed uncertainty surrounding developments in Ukraine as pro-Russian separatists and Ukrainian forces in the eastern reaches of the country continued to clash yesterday, resulting in the death of one Ukrainian soldier. Ukraine will hold elections on May 25 and concerns persist of a civil war.

Another geopolitical flashpoint are the rising tensions between the U.S. and China. The superpowers are clashing over territorial disputes and yesterday the U.S. indicted five Chinese military officials for stealing trade secrets.  

China has responded by suspending its involvement in a cyber security working group and threatened further retaliation. The indictment is a “serious violation of the basic norms of international relations and damaged China-U.S. cooperation and mutual trust,” Foreign Ministry spokesman Qin Gang said in a statement.

Russia's President Vladimir Putin has arrived in Shanghai ahead of a summit at which Russia and China are hoping to deepen ties including a $60 billion gas deal. This would likely see China pay for Russian gas in yuan thereby delivering another blow to the dollar as a global reserve currency as currency wars intensify.

The two countries will make a "substantial" announcement and sign agreements, said state Chinese media Xinhua. They will also kick off a joint military exercise involving their navies.

Global Gold Demand (Official) Steady At 1,074 Tonnes In Q1, 2014. Gold Market Ignores PBOC "Elephant In Room"

After the record year for gold demand that was 2013, gold demand made a robust start to 2014 - virtually unchanged year-on-year at 1,074.5 tonnes according to the World Gold Council data.


World Gold Council - Gold Demand Trends First Quarter 2014

Global demand fell to 1,074.5 metric tons in the quarter, from 1,077.2 tons a year earlier.

Jewellery demand gained moderately, largely due to the environment of lower gold prices compared with Q1 2013 and seasonal factors in many markets including Chinese New Year and Valentines Day.
The gain in jewelry usage represented the strongest start to a year since 2005 with buying up about 10% in China, the world’s biggest gold buyer.

Divergence was seen within the investment sector. The source of supply that was ETF liquidations came to an end as ETFs flows were zero, compared with 177 tonnes of outflows in Q1 2013.

Store of value, bullion coin and bar demand unsurprisingly fell below the record Q1 levels of demand seen a year ago.


World Gold Council - Gold Demand Trends First Quarter 2014

Central bank demand fell marginally but remained robust as central banks continued to purchase gold for its diversification and risk management properties .

Thus, jewelry purchases primarily from store of value buyers in Asia countered declines  from record levels in investment, store of value and central-bank buying.

Conclusion
Much of the decline in coin and bar demand was due to the plunge in Indian demand due to import duties and restrictions. This shows how the figures may not capture the full level of global gold demand due to the huge wave of gold smuggling into India in recent months.

Another important caveat to the figures is the ‘elephant in the room’ that is demand from the People’s Bank of China (PBOC).

The PBOC does not declare their monetary gold purchases to the IMF or release the data. However, most market participants accept that they have and are quietly buying significant amounts of gold as part of their foreign exchange diversification programme and as part of their strategic goal to position the yuan as a rival reserve currency ( see Currency Wars: Bye, Bye Petrodollar - Buy, Buy Gold).

The World Gold Council report and the important context of gold smuggling in India and elsewhere and undeclared central bank demand shows that the supply demand fundamentals of the gold market remain robust. They should both support gold at these prices and lead to higher prices in the coming months after gold’s multi month period of correction and consolidation.

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Wed, 05/21/2014 - 05:15 | 4780289 Jano
Jano's picture

the tompson-reuters morons with their statements, like pro-Russian separatists...they are really sickos.

Wed, 05/21/2014 - 00:30 | 4780092 Latitude25
Latitude25's picture

This guy says that the tax has only padded the pockets of govt officials and has not affected the flow of gold into India at all.

http://www.ingoldwetrust.ch/jayant-bhandari-indians-are-desperate-for-go...

Tue, 05/20/2014 - 20:24 | 4779412 Quinvarius
Quinvarius's picture

This intervention is going to unwind so fast it will silence the internet.  I look at this and I can't believe these idiots actually thought this would work.

Tue, 05/20/2014 - 19:37 | 4779241 DirkDiggler11
DirkDiggler11's picture

I stack, because I can.

Disclosure: long lb, Au, Ag, and FF ( food&firearms)

Tue, 05/20/2014 - 18:20 | 4779033 Conax
Conax's picture

"Much of the decline in coin and bar demand was due to the plunge in Indian demand due to import duties and restrictions."

The recent Indian elections should provide a remedy, rendering this point moot.

The excessive demand during 2013 was a direct result of the foolish and short-sighted ultra-low paper pricing conjured by the usual suspects. This is troubling, I would like to see our country keep at least a little real money in the cookie jar. Apparently they have no qualms and will dump it all.

When they are finished, we will be finished.

Tue, 05/20/2014 - 18:13 | 4779022 Stuck on Zero
Stuck on Zero's picture

One gold supply factor I do not see properly accounted for is illicit gold mining.  Peru alone has more than 100,000 illegal gold mining operations.  Africa has millions of gold mining operations.  These operations range from single individuals panning in a stream to huge open pit mines with machinery.  How much gold comes from these operations?

 

Tue, 05/20/2014 - 17:18 | 4778889 Sudden Debt
Sudden Debt's picture

more time to stack more.

Tue, 05/20/2014 - 17:16 | 4778883 Hongcha
Hongcha's picture

Like an organ grinder's monkey, I have been conditioned to brace myself for a backflip when the music slows down.  In this case I do not like the narrowing range on the Au and Ag charts, and anticipate another breakdown below current support.

Anyone else feel that way after, oh, 30 months of this shit?

Wed, 05/21/2014 - 04:36 | 4780255 TheRideNeverEnds
TheRideNeverEnds's picture

Gold is a worthless pile of shit, GBP is clearly where it's at.

Tue, 05/20/2014 - 17:56 | 4778983 Bemused Observer
Bemused Observer's picture

I don't know...I don't really pay attention to the price fluctuations with gold and silver. To me, they are different. I'm enjoying all these lower prices, because it makes it easier for me to buy in my usual second-hand markets. Gold jewelry is showing up again mixed in amongst the costume junk, and I've been picking up a nice amount every weekend. Continued low prices will keep people from examining every little item like they did when it was 2000 an ounce. And silver? Hell, people don't even LOOK at the stuff anymore, and I'm scooping up sterling like cigarette butts on a barroom floor...

But I guess people who trade are having fits with the PM markets. To me, PM's are to buy and hold, not trade. I did quite well with scrap gold when the prices went up so high, I'd actually go around with a small container of scrap in my pocketbook. If I needed some quick cash, I'd sell some to a jeweler who pays well, and walk out the door 5 minutes later with a nice wad of cash...

So now I need to replenish my 'stocks'...and these prices are working for me!

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